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Lakshmikumaran & Sridharan 2014 6 - 37

June2014 S. Seetharaman,

Lakshmikumaran & Sridharan

INTERNATIONAL TRADE AMICUS / June, 2014

2© 2014 Lakshmikumaran & Sridharan, IndiaAll rights reserved

By Tarun Bhati

Article

Introduction

WTO Members who initiate and conduct safeguard investigations are required to abide by the requirements of both, the WTO Safeguards Agreement as well as GATT, Article XIX. Article XIX: 1(a) of GATT states, in relevant part, as follows:

“If, as a result of unforeseen developments and of the effect of the obligations incurred by a contracting party under this Agreement, including tariff concessions, any product is being imported into the territory of that contracting party in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers in that territory of like or directly competitive products, the contracting party shall be free, in respect of such product, and

to the extent and for such time as may be necessary to prevent or remedy such injury, to suspend the obligation in whole or in part or to withdraw or modify the concession.”

The object and purpose of Article XIX is, to allow a member to re-adjust temporarily, the balance in the level of concessions between that member and other exporting members when it is faced with ‘unexpected’ circumstances which cause or threaten serious injury to domestic producers of like or directly competitive products.

Three legal prerequisites as set out in Article XIX:1(a) of GATT are (a) unforeseen developments; (b) obligations undertaken under GATT, including tariff concessions;

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15

16

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and (c) the two factors stated above cause increased imports.

Obligations

The Appellate Body in Argentina-Footwear (EC) opined that it must be demonstrated, that the importing member has incurred obligations under the GATT 1994, including tariff concessions 1. The contours of such “obligations”, however, have not been defined. Yet, the investigating authorities should not presume that by becoming members of the WTO and by binding themselves to some commitments other than tariff concessions, they automatically meet this requirement of Article XIX: 1(a). Instead, such an examination should be done on a case by case basis. In Dominican Republic – Polypropylene Bags and Tubular Fabrics, the Panel held that the importing Member must have incurred obligations under the GATT 1994, for example, tariff concessions with respect to the product in question; it then falls on the importing Member to identify those obligations incurred under the GATT 1994 that are linked with the increase in imports causing serious injury to its domestic industry; these findings and conclusions must be reflected in the report of the competent authority. India does not appear to have examined this aspect in this manner in any of its findings so far.

Unforeseen development

It means the circumstances which were

unforeseen or unexpected at the time of entry into force of WTO Agreement and at the time of incurring such obligation2. Mere listing of certain developments as unforeseen developments will not be sufficient. The investigating authority shall demonstrate why such developments are considered unforeseen. Therefore, if increased imports are caused by factors other than the unforeseen development identified by the investigating authority, the requirement of Article XIX: 1(a) remains unsatisfied.

In terms of procedural obligation, the Appellate Body in US-Lamb has ruled that existence of “unforeseen developments” is a pertinent issue of fact and law under Article 3.1 of the Agreement on Safeguards (AoS) and it is necessary that the published report of the competent authorities, under that article, must contain a finding or reasoned conclusion on unforeseen developments3. Therefore, investigating agencies must clearly show in their finding that the issue of unforeseen development has been examined by the agencies and how the “unforeseen developments” resulted in the increase in imports of the subject goods causing serious injury to the domestic industry.

The demonstrat ion of “unforeseen developments” must be performed for each product subject to a safeguard measure4.

1 Appellate Body Report, Argentina-Safeguard Measures on Import of Footwear, para 912 Appellate Body Report, Argentina-Safeguard Measures on Import of Footwear, para 963 Appellate Body Report, US-Safeguard measures on imports of fresh, chilled or frozen lamb from New Zealand and

Australia, para 764 United States - Definitive Safeguard Measures on Imports of Certain Steel Products (DS248, DS249, DS251, DS252,

DS253, DS254, DS258, DS259)



It is not sufficient merely to demonstrate that “unforeseen developments” resulted in increased imports of a broad category of products that included the specific products subject to the respective determinations.

However, the Indian practice on existence of unforeseen developments is not in accordance with the AoS and WTO jurisprudence. For example, the panel in Argentina-Preserved Peaches emphasized that increase in imports should not be equated with unforeseen developments whereas the Indian Safeguard authority has held increase in imports itself as “unforeseen development” in a number of its decisions.

Analysis of the findings by India in the last 6 years

Some of decisions of the Indian Safeguard authority Directorate General of Safeguards (“DG Safeguards”) relating to the unforeseen developments are examined here.

Trade remedial actions by USA and EU against exports from China and unexpected drop in consumption in European Markets5 were considered to be “unforeseen developments” resulting in increased imports into India. However, the final findings do not contain any data relating to the drop in consumption in European markets and why such drop in consumption was considered unexpected. There is also no evaluation as to whether

trade remedy actions by USA is the cause or it is only a remedy to the underlying cause of low priced exports from China to those countries. Since the latter is the real cause, Indian authority has only examined the low export price of the Chinese producers as the unforeseen development.

Low price of raw material in China6 has been held to be an unforeseen development resulting in increased imports into India. However, there is no examination as to (a) why the low prices of raw materials in China are considered to be unforeseen; (b) whether the said prices in China were higher in the past and fell down unexpectedly or the prices existed at lower levels throughout. In fact this decision is contrary to what the Panel has stated in Chile – Price Band System and Safeguard Measures relating to certain agricultural products where Chile had not set forth reasoned findings as to as to why the reported “sizeable and rapid decrease in international prices” could be regarded as an unforeseen development.

Increase in production (of DOP) in China reduced the market opportunity to the producers in other countries such as Korea and Taiwan and these producers were forced to look around for other markets such as India that caused increased imports to India from Korea and Taiwan7. However, a perusal of the underlying data shows a somewhat skewed

5 Final finding dated 11th March 2014 issued by DG Safeguards concerning imports Seamless Pipes and Tubes into India, page 145

6 Final finding dated 31st July 2012 issued by DG Safeguards concerning imports of Carbon Black(China Specific safeguard measure)

7 Final finding dated 16th November 2012 issued by DG Safeguards concerning imports of Dioctyl Phthalate (DOP) into India, Para 39



trend. For instance drop in Korean exports of DOP to China from 2007 to 2011 was over 108,000 MT but exports to India rose only by 3,374 MT during the same period. Such an increase could be more appropriately attributed to the normal increase over the said period and could not be attributed to any “unforeseen developments”. Thus, the analysis and conclusions of the Indian authority were not supported by the underlying data.

Slowdown in the end markets of Europe and America from 2009 onwards and the crises in Spain, Italy, Portugal, Greece and Ireland resulted in surplus production worldwide in comparison to available capacity since plants had to operate at sufficient run rates to achieve economies of scale. The surpluses for the industry were channeled into India. These developments were held to be unforeseen. In addition, imposition of antidumping duty by China and Pakistan on the imports from Korea and Taiwan was also considered to be an unexpected development8. The first reasoning appears to be ‘unforeseen’ but the second one was a remedy instituted by a government and not a cause as stated earlier.

Excess capacity in major exporting countries and increasing Indian demand were found to be the reasons for increase in imports. Without assigning any reasons and without examination, the Indian authority has held that the said developments to be ‘unforeseen

developments’9.

Special relationship between a Chinese and a South Korean producer as well as recession in the global market leading to significant drop in demand for the product in developed countries and China10 were considered to be “unforeseen developments” resulting in increased imports into India. However, the final finding does not contain any data on how the special relationship between the two companies resulted in an increase in imports into India.

Unexpected fall in demand worldwide on account of recession coupled with the imposition of export duty on basic raw material from which users in exporting country are immune11 were considered to be “unforeseen development” resulting in increased imports into India. However, the final finding does contain any analysis on how the imposition of export duty on the basic raw material has resulted in increase in imports of the finished product into India. Also simply listing unexpected fall in demand worldwide on account of recession without analyzing how it would lead to increased imports into India is not sufficient to meet the requirements of WTO law and jurisprudence.

Interestingly, India has also held that “additional capacities in China PR and new capacities planned in United States and unforeseeably low pricing of imports despite

8 Final finding dated 29th March 2012 issued by DG Safeguards concerning imports of Phthalic Anhydride (PAN) into India9 Final finding dated 17th September 2013 issued by DG Safeguards concerning imports of Sodium Nitrite into India, para 5210 Final finding dated 6th June 2011 issued by DG Safeguards concerning imports of PX-13 or 6-PPD into India, para 21411 Final finding dated 14th May 2009 issued by DG Safeguards concerning imports of Dimethoate Technical into India



increase in material cost”12 did not constitute unforeseen developments. Thus, no consistent trend emerges as to what would constitute ‘unforeseen developments’. Conclusion

It can be concluded that the safeguard measure should only be applied in emergency situations as a measure to protect the domestic industry against increased imports, resulting from unforeseen developments under such conditions

to cause serious injury to the domestic industry. India’s determinations with regard to ‘unforeseen development’ have improved over time but lack consistency in application. Further, India is yet to determine whether the increased imports were an effect of obligations undertaken under GATT including tariff concessions. [The author is an Associate, International Trade Team, Lakshmikumaran & Sridharan, New Delhi]

Trade Remedy News Trade remedy actions against China

Product Measures Notification No. and dateCountry

Aluminum united curtain wall

Agglomerated stone

53-Foot Domestic Dry Containers53

1,1,1,2-Tetrafluroethane1,1,1,2-

1,1,1,2-Tetrafluoroethane1,1,1,2-

ADD reinvestigation – updated normal value and export price in final determination

-

ADD proceedings terminated

ADD and CVD investigations initiated

ADD investigation - Preliminary determi-nation of sales at less than fair value and critical circumstances

-

Affirmative preliminary determination amended

Dated 26-5-20142014 5 26

EU’s Notice 2014/272/EU, dated 13-5-20142014 5 13

2014/272/EU

79 FR 28674 [A-570-014] and 79 FR 28679 [C-570-015], both dated 19-5-20142014 5 19 79 FR 28674 [A-570-014] 79 FR 28679 [C-570-015],

79 FR 30817 [A-570-998], dated 29-5-20142014 5 2979 FR 30817 [A-570-998]

79 FR 31088 [C-570-999], 30-5-20142014 5 3079 FR 31088 [C-570-999]

Canada

EU

USA

USA

USA

12 Final finding dated 11th March 2014 issued by DG Safeguards in Seamless Pipes & Tubes investigation, page 145




Cold Rolled Flat Prod-ucts of Stainless Steel

Circular welded carbon quality steel line pipe

Ceramic ware

Ceftriaxone Sodium Sterile

Cast aluminium alloy wheels or alloy road wheels

Castings for Wind Operated Electricity Generators

Candles, tapers and the like

Calcium Hypochlorite

Calcium Hypochlorite

Barium carbonate

ADD extended till 21-4-2015, consequent to initiation of sunset review

2015 421

ADD and CVD to continue

ADD investigation initiated

ADD sunset review recommends continuation of anti-dumping duty

Time limit for completing investigation extended up to 9-6-2014

2014 6 9

Countervailing duty investigation initiated

ADD – Initiation of sunset review-

Preliminary determination of anti-dumping duty investigation postponed

Preliminary affirmative countervailing duty determination

Affirmative ADD sunset review final determination

20/2014-Cus. (ADD), dated 12-5-20142014 5 1220/2014-Cus. (ADD)

79 FR 28894 [A-570-935, C-570-936], dated 20-5-20142014 5 20 79 FR 28894 [A-570-935, C-570-936]

Resolution No.082, dated 5-5-20142014 5 5 082

15/12/2012-DGAD, dated 20-5-20142014 5 2015/12/2012-DGAD

14/7/2012-DGAD, dated 8-5-20142014 5 814/7/2012-DGAD

17/6/2013-DGAD, dated 29-5-20142014 5 2917/6/2013-DGAD

EU’s Notice 2014/C 144/05, dated 14-5-20142014 5 14

2014/C 144/05

79 FR 25570 [A-570-008], dated 5-5-20142014 5 579 FR 25570 [A-570-008]

79 FR 30082 [C-570-009], dated 27-5-20142014 5 2779 FR 30082 [C-570-009]

Dated 4-6-20142014 6 4

India

USA

Columbia

India

India

India

EU

USA

USA

USA




Flexible Slabstock Polyol (FSP)

Flax Fabric

Electrical ironing press

Electrical apparatus

Diamond saw blade

Diclofenac Sodium

Crystalline Silicon Photovoltaic products

Crystalline Silicon Photovoltaic products

Crystal l ine si l icon photovoltaic modules or panels

Copper pipe fitting

Safeguard investigation initiated

ADD extended till 25-3-2015, consequent to initiation of Sunset review

2015 3 25


ADD sunset review initiated


Time limit for completing investigation (SSR) extended up to 8-7-2014

20147 8

ADD investigation - Preliminary determination postponed

-

Affirmative CVD preliminary determination


Final determination of ADD and CVD reinvestigation

F.No. D-22011/04/2014, dated 22-5-20142014 5 22

D-22011/04/2014


Resolution 63/2014, dated 16-5-20142014 5 16

63/2014


65/2014

Dated 20-5-20142014 5 20

15/3/2013-DGAD, dated 9-5-20142014 5 915/3/2013-DGAD

79 FR 30084 [A-570-010], dated 27-5-20142014 5 2779 FR 30084 [A-570-010]

Dated 3-6-20142014 6 3

Anti- dumping Notice No. 2014/38, dated 14-5-20142014 5 14

2014/38

Dated 30-5-20142014 5 30

India

India

Argentina

Argentina

USA

India

USA

USA

Australia

Canada




Graphite electrodes of small diameter

Grain-Oriented Electrical Steel

Glass Fibre

Glass Fibre

Fully drawn yarn

Frontseating service valves

Freshwater Crawfish Tail Meat

Fresh garlic

Flour

ADD sunset review – Affirmative finding of recurrence of dumping

-

Preliminary determination of sales at less than fair value. Final determination postponed

Initiated ADD mid-term review

Glass fibre with fibre in diameter in the range of 0.3-2.5 microns excluded from ambit of ADD pursuant to mid-term review

0.3-2.5


2015 3 25

ADD revoked

ADD Administrative Review partially rescinded and New Shipper Review rescinded.

ADD to continue consequent to sunset review

ADD new shipper review – issued preliminary determination

Imposed quota safeguard measure

79 FR 26208 [A-570-929], dated 7-5-20142014 5 779 FR 26208 [A-570-929]

79 FR 26936 [A-570-994], dated 13-5-20142014 5 1379 FR 26936 [A-570-994]

Dated 25-4-20142014 4 25



79 FR 27573 [A-570-933], dated 14-5-20142014 5 1479 FR 27573 [A-570-933]

79 FR 26711 [A-570-848], dated 9-5-20142014 5 979 FR 26711 [A-570-848]

79 FR 28483 [A-570-848], dated 16-5-20142014 5 1679 FR 28483 [A-570-848]

Dated 20-5-20142014 5 20

Dated 7-5-20142014 5 7

USA

USA

Turkey

India

India

USA

USA

USA

Indonesia




Pencil

Nylon Tyre Cord Fabric (NTCF)

Non-Oriented Electrical Steel

Non-alloy hot-rolled flat products

Monosodium Gluta-mate

Measuring tapes

Light-Walled Rectangu-lar Pipe and Tube

Iron or non-alloy steel flat products

Injection presses

High Density Polyeth-ylene and Linear Low Density Polyethylene

Anti-dumping duty made final

ADD extended till 28-4-2015, conse-quent to initiation of sunset review

2015 4 28

Preliminary affirmative determina-tions of sales at less than fair value and critical circumstances

Provisional Safeguard duty imposed

Preliminary determination of sales at less than fair value

ADD Sunset review initiated

Affirmative ADD and CVD (SSR) determination

Safeguard duty proposed to be imposed

ADD Sunset review initiated

Terminated safeguard investigation

MOFCOM Notice dated 29-5-20142014 5 29


79 FR 29421 [A-570-996], dated 22-5-20142014 5 2279 FR 29421 [A-570-996]


79 FR 26408 [A-570-992], dated 8-5-20142014 5 879 FR 26408 [A-570-992]

15/9/2014- DGAD, dated 9-5-20142014 5 915/9/2014- DGAD

Dated 23-5-20142014 5 23


15/2/14-DGAD, dated 9-5-20142014 5 9 15/2/14-DGAD

Dated 30-4-20142014 4 30

Mexico

India

USA

Thailand

USA

India

USA

Indonesia

India

Taiwan




Sodium di-chromate

Sodium Bicarbonate

Saturated fatty alcohols

Refined Brown Aluminum Oxide

PX-13 or 6 PPD (Rubber Chemicals)

Prestressed Concrete Steel Rail Tie Wire

Pre- and post-stressing wires and wire strands of non-alloy steel

Polyvinyl chloride (PVC)

Pentaerythritol

Safeguard investigation initiated

Effective rate of interim dumping duty revised

Provisional safeguard duty recommended 20% ad valorem for 200 days

200 20%

ADD sunset review – Affirmative finding of recurrence of dumping

-

ADD recommended to continue consequent to sunset review

Final determination of sales at less than fair value


Provisional ADD imposed

Time limit for completing investigation (SSR) extended up to 24-7-2014

2014 7 24

F.No. D-22011/ 05/2014, dated 26-5-20142014 5 26

D-22011/ 05/2014

Anti-dumping Notice No. 2014/44, dated 28-5-20142014 5 28

2014/44

F.No. D-22011/ 26/2013, dated 26-5-20142014 5 26 D-22011/ 26/2013

79 FR 26207 [A-570-882], dated 7-5-20142014 5 779 FR 26207 [A-570-882]

Dated 29-4-20142014 4 29

79 FR 25572 [A-570-990], dated 5-5-20142014 5 579 FR 25572 [A-570-990]

EU’s Notice 2014/C 138/10, dated 8-5-20142014 5 8

2014/C 138/10

Resolution No. 184/2014 dated 27-5-20142014 5 27

184/2014

15/19/2012-DGAD, dated 9-5-20142014 5 915/19/2012-DGAD

India

Australia

India

USA

India

USA

EU

Argentina

India




Wooden bedroom furniture

Welded stainless steel pressure pipe

Vitamin EE

Vacuum flask

Three-phase transformer

Synthetic fibre blanket

Sulphur Black

Steel cable

Solar Glass

Solar Cells

Changed circumstances review initiated for consideration of revocation of anti-dumping duty order in part

ADD and CVD quick sunset review initiated


2015 3 26

ADD imposed to continue consequent to sunset review

Preliminary determination to continue the investigation but not to levy preliminary duty

Affirmative ADD final determination

Time limit for completing investigation extended up to 3-7- 2014

2014 7 3

Preliminary determination to continue the investigation but not to levy preliminary duty

Definitive ADD imposed

Definitive ADD recommended for 5 years

5

79 FR 25110 [A-570-890], dated 2-5-20142014 5 279 FR 25110 [A-570-890]

[701-TA-454], dated 9-5-20142014 5 9 [701-TA-454]



66/2014


76/2014

Dated 26-5-20142014 5 26

15/18/2012-DGAD, dated 8-5-20142014 5 815/18/2012-DGAD

Dated 7-5-20142014 5 7

Commission Implementing Regulation (EU) No. 470/2014, dated 13-5-20142014 5 13

470/2014

14/5/2012-DGAD, dated 22-5-20142014 5 2214/5/2012-DGAD

USA

USA

India

Argentina

Argentina

Mexico

India

Mexico

EU

India



Single-mode Optical Fibers

Perchlorethylene

ADD Preliminary Ruling announced – Security deposit to be made

-

Definitive ADD imposed

MOFCOM Announcement No. 33 of 2014, dated 19-5-2014

2014 5 192014 33


2014 5 302014 32

India

EU and USA

Trade remedy actions by China


Acetone ADD sunset review – ADD to be imposed for another 5 years

- 5


2014 6 62014 40

Japan, Singapore, Korea RP

and Taiwan

Alloy-steel Seamless Tubes and Pipes for High Temperature and Pressure Service

Definitive ADD imposed MOFCOM Announcement No. 34 of 2014, dated 12-5-2014

2014 5 122014 34

EU, Japan and USA

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